Assessing Competitiveness In Moldova's Economy - Economic Growth

Development Alternatives, Inc. Moldova Competitiveness Assessment: The Textiles & Apparel Cluster
Competing in the Global Apparel Industry
The apparel industry is operating globally. It has been regulated by international agreement,
originally under the Multifibre Arrangement (MFA, 1974-1994), and subsequently, from
1995 onward, by the transitional WTO Agreement on Textiles and Clothing (ATC), which
expires on December 31, 2004. The MFA provided the framework for bilateral negotiations
to establish textile and clothing quotas, in large part to protect the industry in the importing
country against damages from so-called uncontrolled surges in imports. The ATC sought to
facilitate the progressive integration of textile and clothing products into General Agreement
on Tariffs and Trade (GATT) 1994 rules, and to phase out all quotas gradually, up to their
complete elimination by January 1, 2005.
The effects of the looming demise of all quotas are the subject of much analysis and spirited
debate. The impact is likely to vary by market segment. For the more commoditized, less
fashion-sensitive segments, economies of scale matter. For these products, the elimination of
quotas favors increased concentration among the large producers, such as China or
Bangladesh, although buyers will maintain some diversification to curtail risk. For fashion
items, flexibility, quality, and speed to market are likely to emerge (or remain) as key factors.
With respect to apparel production or processing, a recent study by the U.S. International
Trade Commission identified six major factors of competitiveness, shown in Table 1.
July 2004 • DRAFT Page 2